NASE on Micro-Business

Archive for March 2009

Here is some timely tax information release by the the IRS:

Small businesses with deductions exceeding their income in 2008 can use a new net operating loss tax provision in the American Recovery and Reinvestment Act to get a refund of taxes paid over the past five years instead of the usual two.

To accommodate the change in tax law, the IRS has updated the instructions for Form 1045 and Form 1139, which small businesses will use to take advantage of the carryback provision.

IRS Form 1045, Instructions
IRS Form 1139, Instructions

An IRS news release and question-and-answer document have more information on the net operating loss carryback provision.

More Help for Small Business
The Recovery Act also includes the following business-related provisions:
• Sec. 179 Deduction Increases to $250,000: An expanded Sec. 179 deduction allows small businesses to write off up to $250,000 of qualified investment in 2009.
• Reduction of Estimated Tax Payments: Normally, small businesses have to pay 110 percent of their previous year’s taxes in estimated taxes. The Recovery Act permits small businesses to reduce their estimated payments to 90 percent of the previous year’s taxes.
• Extension of Bonus Depreciation Deductions Through 2009: Bonus depreciation is extended through 2009, allowing businesses to take a larger tax deduction within the first year of a property’s purchase.
• Capital Gains Tax Break for Investment in Small Business: Investors in small business who hold their investments for five years can exclude from taxation 75 percent of their capital gains.

Read more about the American Recovery and Reinvestment Act of 2009.

Have your own tax questions? Ask the NASE’s TaxTalk!

According to the Wall Street Journal’s Independent Street blog, the Senate confirmation hearing for Karen Gordon Mills, President Obama’s nominee to lead the Small Business Administration, is set for Wednesday April 1st. 

Many in the small-business communityhave been frustrated that Mills’ confirmation process has taken so long, but hopefully she will be on the job and working to help small businesses soon!

The Internal Revenue Service (IRS) has forums every other month for its small business stakeholders, like the NASE.  I attended the second forum of 2009 earlier this week, and learned a couple of things that I hope will be helpful!

The recent stimulus legislation, the American Reinvestment and Recovery Act, included a much-discussed net operating loss carryback provision.  There is still time to take advantage of this provision even if you’ve already filed your 2008 return and waived the carryback, if you filed your 2008 return and didn’t waive the carryback, or if you haven’t filed your 2008 return yet.  However, there is not a lot of time left to take advantage of the carryback provisions – many of these forms are due by April 17, 2009!  Check out IRS.gov for more detailed information and filing instructions.

If you’ve been lucky enough to get first-hand tax advice from Keith Hall at one of our TaxTalk Seminars, you’ll remember that he makes a point to say not to run your business like you’re going to get audited.  I almost laughed at this IRS forum when one of the topics presented was about the audit process.  We were reminded that returns are randomly selected for audits, and if you file electronically you are no more likely to be selected for an audit than if you do a paper return.  Also, audits aren’t necessarily bad!  It’s more likely than not that if you are audited, your return will have no change or you might even get a refund.  Like Keith says, don’t run your business (or live you life) expecting to get audited, but remember that everyone needs to keep adequate books and records, and the more organized you are the easier it is if you are audited!

As this year’s Cover the Uninsured Week starts to wind down, I am encouraged that we will see major steps in reform for the working uninsured. And that’s a nice place to be.

With over 60 percent of Americans living without health insurance coming from a family where the head of household works for a small business, the NASE routinely supports efforts, like Cover the Uninsured Week, to inform folks about their coverage options from federal or state programs.

The NASE conducts several online polls of our members each year. Recently, we asked micro-businesses to speak up about their health care situation. It’s nothing new that many people, not just the self-employed, struggle to pay their premium costs. However, we found that one quarter of micro-business owners are currently uninsured, and almost three-quarters (71 percent) have been uninsured at some time.

While corporations are able to deduct health insurance premiums as a business expense and forego FICA (Social Security and Medicare) taxes on these expenses, the self-employed are not. As I mentioned in last week’s blog post, The Equity for Our Nation’s Self-Employed Act (H.R. 1470) would eliminate this double digit disparity in the tax code, which inhibits the self-employed from receiving a full deduction for health insurance costs.

Cover the Uninsured links:

 

 

 

Keith has been spreading the gospel of small-business taxes from Boston to Oakland as part of the NASE’s TaxTalk Seminar program this week.  He’s been just a little busy answering questions and sharing tax tips on everything from oft-forgotten deductions to how to hire your kid with micro-business owners across America. 

If you’re in Denver or San Marcos, Texas, you might be lucky enough to have the chance to ask Keith your tax questions in person if you register online asap!  If you missed Keith this year and still have a burning question about your taxes, don’t despair; tax experts are available 24/7 to answer your small-business tax questions online through TaxTalk on the NASE’s Web site.

Independent Street, the WSJ small-business blog, wrote about the reaction to President Obama’s plan to increase lending to small businesses through the Small Business Administration today.

It isn’t that good. Independent Street argues that small businesses don’t have assets to put up as collateral for an SBA loan. That they need smaller amounts to get a kick-start, or to grow their business.

That’s the exact reason the NASE started the Business Development Grant Program! Ironically, I wrote about our first month’s applications just a few days ago, calling it our own little stimulus plan.

So if you aren’t thrilled about the idea of applying for an SBA loan, but need a bit of capital to grow your business, check the grant program out!

Since my last post, folks on Capitol Hill have introduced some great legislation for small and micro-businesses:

The Equity for Our Nation’s Self-Employed Act (HR 1470), introduced in the House of Representatives by Reps. Ron Kind (D-Wis.), Wally Herger (R-Calif.), Suzanne M. Kosmas (D-Fla.) and David G. Reichert (R-Wash.), would eliminate an inequity in the tax code that inhibits the self-employed from receiving a full deduction for health insurance costs. Click here for more detail on the NASE’s position.

Legislation introduced last week by Congressmen John M. McHugh (R- N.Y.)  and Kurt Schrader (D-OR) would make it easier for home businesses to deduct office expenses by offering a $1,500 standard deduction to eligible taxpayers. The Home Office Deduction Simplification Act (HR 1509) would also require that the amount be indexed for inflation. Click here to find out past work on a standard home office deduction.

Both of these bills are promising legislation and I’d venture to say that they have a reasonable chance of being approved.  And why is that? Well, they involve small and simple changes to the tax code that will help A LOT (millions and millions) of people. In a town where important reform packages often fall victim to partisan sniping, little tweaks to the tax code and quantifiable results say a lot.

To read into the specifics of each bill, visit the “mother of all legislative search engines,” THOMAS at the Library of Congress.

Keep updated on the latest small business legislative news by signing up for my weekly E-newsletter, Washington Watch.


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